Corresponding with the release of the 1Q 2019 NVCA-PitchBook Venture Monitor report, we hosted a webinar with industry experts about the state of VC through 1Q and how valuations and deals looked strong headed into the second quarter. To see some of what our experts had to say, check out the Q&A below or watch the full webinar.
We were joined by:
Buddy Arnheim
Co-Chair, Emerging Companies & VC Practice, Perkins Coie
Lewis Hower
Managing Director, Early Stage Practice Silicon Valley Bank
Ryan Logue
Head of Business Development & Innovation, Private Markets Solium
The following excerpt has been edited for length and clarity.
PitchBook: What do you make of IPO activity? Can you share some reactions to the prices of recent large IPOs.
Lewis Hower: The first thing that comes to mind is how incredibly exciting it is. We haven’t seen this level of IPO activity, particularly in early-stage companies. This is the dream for entrepreneurs and investors everywhere to say, “We started a company with just an idea,” and however many years later—we’re seeing them take a little longer than they used to—but now we’re seeing companies that are exiting at valuations that are double-digit billions.
One thing that’s important to note is this is validating, continuing to validate the very large fund size, to chase the unicorn. I think there were a lot of questions early on when we saw more and more companies continuing to be private for longer, about whether this was going to actually work. Here we are—fast-forward to 2019—and this is validating the model.
PitchBook: Is there an ideal set of attributes that a company should possess that would peg them as a strong candidate for going public?
Ryan Logue: I would say, just kind of bolstering the Zoom story and some of the other smaller companies coming out, is the whole B2B SaaS situation where you see a lot of the best companies in that space doing really well—both the ones that are coming out now and the ones that have been around for a while. And these are also great businesses that are growing at a fast clip, which is solving a lot of the investor needs and wants that they are finding with a number of the public companies that exist today.
PitchBook: Do you anticipate this IPO activity to carry through the year?
Buddy Arnheim: We’ve got a pipeline of companies that have been private and growing very successfully over the last decade. I mean there’s a big pipeline of late-stage private companies that are rumored to have strong financial performance and growth. I think with those two characteristics, as well as a receptive public offering market, early-stage public investment temperament, we are going to see continued IPO activity.
Theoretically, there’s a limit to how much early-stage public investment can be placed in a given period. We’ve seen that over the last several decades, as pipelines of IPO companies have come and gone. There is a fatigue factor that could enter the market, and with the size of the new issues that we’re seeing today versus what we saw in the pre-2008 timeframe, there’s a risk that that fatigue could come sooner rather than later. There’s also the “clutter factor” where competitors are addressing the public market at the same time and there’s just a saturation of companies in each tech sector hitting the public market at the same time.
Miss the webinar? Watch it now.
